[52] Information on segment reporting Audited

Segmentation was performed in accordance with the organizational and reporting structure of the Merck Group. Within the Merck Serono division, Merck focuses on specialist therapeutic areas and markets innovative prescription drugs of chemical and biotechnological origin. The Consumer Health division comprises Merck’s business with high-quality over-the-counter products for preventive health care and self-treatment of minor ailments. The Performance Materials division consists of the Liquid Crystals and Pigments & Cosmetics business units. The Merck Millipore division offers solutions to two key customer groups: research and analytical laboratories in the pharmaceutical/biotechnology industry or in academic institutions, and customers manufacturing large- and small-molecule drugs. The fields of activity of the individual divisions are described in detail in the sections about the divisions in the Group management report.

Corporate and Other includes assets and liabilities as well as income and expenses that cannot be directly allocated to the reportable segments presented; it serves the reconciliation to the Group numbers. The numbers mainly relate to Group functions. The cash flows attributable to the financial result and income taxes are also presented under Corporate and Other.

Apart from sales, the success of a segment is mainly determined by EBITDA pre one-time items (segment result) and business free cash flow (see Note [55]).

Transfer prices for intragroup sales are determined on an arm’s-length basis. There were no significant intercompany relations between the business segments.

The Emerging Markets region comprises Latin America and Asia with the exception of Japan. The Rest of World region comprises Japan, Africa and Australia/Oceania.

Neither in 2013 nor in 2012 did any single customer account for more than 10% of Group sales.

The following table presents the reconciliation of EBITDA pre one-time items of all operating businesses to the profit before income tax of the Merck Group:

EBITDA pre one-time items of all operating businesses totaled € 3,450 million (2012: € 3,247.8 million). Taking into account the expenses and income of € –196.7 million (2012: € –282.9 million) not allocable to the operating businesses which were reported under Corporate and Other, EBITDA pre one-time items of the Merck Group amounted to € 3,253.3 million (2012: € 2,964.9 million). This figure did not include depreciation, amortization, impairments and reversals of impairments or one-time items (excluding impairments and reversals of impairments). Consequently, the total operating result (EBIT) of the Merck Group amounted to € 1,610.8 million (2012: € 963.6 million).

The reconciliation of operating assets presented in the Segment reporting to the total assets of the Merck Group was as follows:

The operating assets (gross) of the Merck Group are determined by adjusting all assets totaling € 20,818.6 million (2012: € 21,643.3 million) for monetary assets totaling € 3,539.3 million (2012 : € 2,633.7 million) as well as all other non-operating assets totaling € 913.1 million (2012: € 1,173.3 million) and assets held for sale of € 27.1 million (2012: € 0.0 million). After deducting the reported segment liabilities which represented the operating liabilities totaling € 2,045.1 million (2012: € 1,990.2 million), the operating assets (net) of the Merck Group amounted to € 14,294.0 million (2012: € 15,846.1 million).

The investment result in the amount of € 1.5 million (2012: € 0.6 million) was disclosed for the first time under other operating expenses in 2013 (Note [28]). As in 2012, it was attributable to Corporate and Other.

Expenses for Group functions at consolidated subsidiaries were no longer allocated to the operating segments in fiscal 2013, but rather disclosed fully under Corporate and Other in the Segment reporting. In order to ensure comparability, the previous year’s Segment reporting figures have been adjusted in accordance with the new allocation rules. The effects on the 2012 figures are presented below.

The amended allocation of expenses related to administration expenses as well as other expenses and income. Overall, administration expenses under Corporate and Other increased from € 130.2 million by € 52.8 million to € 183.0 million. Other operating expenses and income rose by € 19.5 million to € 262.8 million from € 243.3 million. Considering the positive investment result of € 0.6 million, other operating expenses and income amounted to € 262.2 million.

In the Merck Serono division, € 33.4 million of the original € 250.2 million in administration expenses was reclassified, resulting in administration expenses of € 216.8 million. Out of the € 674.9 million in other operating expenses and income, € 5.9 million was reclassified. This resulted in other operating expenses and income of € 669.0 million.

In the Consumer Health division, € 3.2 million of the original € 23.1 million in administration expenses was disclosed as Corporate and Other, leaving a balance of € 19.9 million.

In the Performance Materials division, € 4.0 million of the original € 35.2 million in administration expenses was reclassified, resulting in administration expenses of € 31.2 million. Following the reclassification, other operating expenses and income declined by € 7.2 million from € 39.2 million to € 32.0 million.

In the Merck Millipore division, € 12.2 million of the original € 113.5 million in administration expenses was reclassified, resulting in administration expenses of € 101.3 million. Other operating expenses and income declined by € 6.4 million from € 122.9 million to € 116.5 million.

The change in costs in the divisions led to further changes to the earnings and cash flow figures in the Segment reporting. In the operating segments, the respective EBIT, EBITDA, EBITDA pre one-time items, cash flow from operating activities as well as business free cash flow increased by the lower amounts for administration expenses and other operating expenses and income. Moreover, this led to a corresponding increase in the EBITDA margin pre one-time items. The earnings and cash flow figures under Corporate and Other declined in line with allocation of administration expenses and other operating expenses and income. The EBITDA margin pre one-time items also declined accordingly.